'Pursue growth': Citi urged to bet on copper despite near-record prices

Citibank, one of the largest banks and market makers of Wall Street, has changed its view on the copper market and now urges clients to buy the metal, despite the proximity of quotations to historical maximums. Not long ago, the bank doubted the feasibility of such investments.

"We have been cautious about buying copper in recent weeks given the strength of resistance at $13,500. We believe [it] was at least partly the result of strong growth in visible global inventories in the first quarter," CNBC quoted Citi investment strategist Charlie Massey-Collier as saying.

The barrier has now been breached and the bank sees this as a signal for buyers. "Thus, our interpretation of the recent break above $13,500 is that the market is confirming the strength of both structural and cyclical demand, which gives us the confidence to chase this upside move," Massey-Collier wrote.

The market is already justifying this assessment: on May 13, copper in London rose in price for the eighth consecutive session and is close to rising above $14,200 per ton - this is very close to the absolute January record of $14,527, Bloomberg points out. In an optimistic scenario, Citi predicts a rise to $15,000 a ton. As CNBC notes, Massey-Collier himself has already moved from words to deeds: he bought digital (binary) call options on the fact that by August 5 copper will break through the level of $15,250.

Citi's confidence is bolstered by global technological shifts. "Virtually all of the growth in copper demand from 2022 is driven by sources related to the energy transition and artificial intelligence," Massey-Collier stated.

Analysts at investment firm Sprott expect this trend to intensify. According to their forecasts, by 2040, data center infrastructure and energy transition will account for 45% of total copper demand against 32% in 2024, according to Mining.com. An additional driver is the largest copper consumer, China, where inventories of the metal have started to decline, signaling a recovery in real demand.

The situation on the supply side is also interpreted by experts in favor of price growth. According to Sprott, the sulfur deficit due to the war in the Middle East puts at risk the production of sulfuric acid, which is necessary for the extraction of every fifth ton of copper in the world. Sulphuric acid prices have almost doubled since the war began: the Persian Gulf countries, whose supplies passed through the now closed Strait of Hormuz, accounted for about half of the world sulphur trade, Mining.com recalls.

This article was AI-translated and verified by a human editor